Back to top

Image: Bigstock

Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

Read MoreHide Full Article

Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the iShares MSCI USA Equal Weighted ETF (EUSA - Free Report) is a smart beta exchange traded fund launched on 05/05/2010.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Managed by Blackrock, EUSA has amassed assets over $443.32 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, EUSA seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.15% for EUSA, making it one of the cheaper products in the space.

EUSA's 12-month trailing dividend yield is 1.12%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

This ETF has heaviest allocation in the Information Technology sector - about 18.40% of the portfolio. Financials and Healthcare round out the top three.

When you look at individual holdings, Conocophillips (COP - Free Report) accounts for about 0.38% of the fund's total assets, followed by Occidental Petroleum Corp (OXY - Free Report) and Viacomcbs Inc Class B (VIAC - Free Report) .

EUSA's top 10 holdings account for about 2.76% of its total assets under management.

Performance and Risk

The ETF has gained about 18.40% so far this year and it's up approximately 46.72% in the last one year (as of 06/23/2021). In the past 52-week period, it has traded between $55.36 and $84.16.

The ETF has a beta of 1.14 and standard deviation of 23.82% for the trailing three-year period, making it a medium risk choice in the space. With about 625 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $39.46 billion in assets, Vanguard Total Stock Market ETF has $246.96 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Published in